One of the world’s largest ad-buying firms, Magna, has cut down its 2023 U.S. advertising spending forecast as the market grows at a slower rate.
Key Details
- The 2023 ad market is expected to grow 3.4% this year, down from the 3.7% Magna predicted in December.
- Although predictions have been trimmed, the ad market is expected to reach a record high of $326 billion this year.
- The largest growth is expected in streaming and social media ads. Car ads are expected to grow by 10% to 15% this year, while local television ads will decrease by more than 21%.
Why it’s news
The U.S. has been facing high inflation prices and economic uncertainty for months, and the precariousness has flooded into the U.S. ad market with ad-buying firm Magna cutting back on its 2023 forecast.
Despite the ad forecast being further behind than expected, the U.S. ad market continues to grow and remain healthy—it is just growing at a slightly slower rate than expected.
“I feel optimistic because the advertising market is more resilient, robust, and diversified than 20 years ago,” says Magna’s research VP Vincent Létang. Back then, “ad spend would have been on the decline, but now we have a mature, large diversified landscape of digital advertising formats.”
In December, Magna originally predicted the 2023 ad market would grow 3.7% but has now slightly trimmed that number down to 3.4%. The market is expected to reach a record high of $326 billion this year, with Magna experts saying most of the growth will come from streaming and video ads that run on platforms like TikTok.
Ad spending for popular social media and streaming platforms has contributed largely to the ad market growth making up for the slow growth in areas that once had significant growth, such as print, TV, and radio.
Magna originally anticipated 2023 to be a huge year for ad spending predicting global ad revenue would grow 6.3% for 2023 in June, but as ad budgets began declining in September of last year, it lowered the forecast to 4.8%.
Although growth has been slow for the year this far, the ad company expects it will pick up later this year, driven mainly by social media, car, and e-commerce advertising.
The U.S. is looking at a potential TikTok ban due to security risks over the platform’s Chinese ties, but Magna does not think the ban would affect social media advertising even though a large portion of the revenue is from TikTok.
Magna states that if the ban were to go through, users would be forced to send their attention to other apps such as YouTube Shorts and Instagram, and the ad spending would move from TikTok to those platforms as well, keeping spending flowing.